American Public Education: Earnings Preview

Aug. 1.11 | About: American Public (APEI)

American Public Education Inc. (NASDAQ:APEI), an online provider of higher education to the military and public service communities, is scheduled to report its second-quarter 2011 financial results on August 2, 2011. The current Zacks Consensus Estimate for the quarter is 45 cents a share. For the quarter under review, revenue is $60 million, according to the Zacks Consensus Estimate.

First-Quarter 2011, a Synopsis

American Public’s quarterly earnings of 43 cents a share missed the Zacks Consensus Estimate of 45 cents, but rose approximately 8% from 40 cents earned in the prior-year quarter.

Total revenue of $58.7 million was marginally ahead of the Zacks Consensus Estimate of $57 million, and soared 24% from the prior-year quarter.

Total net course registration surged 31% to approximately 81,100, and net course registrations from new students grew 37% to approximately 17,800. American Public stated that about 90,600 students were enrolled in the American Public University System as of March 31, 2011, reflecting an increase of 33%.

Guidance

American Public forecast a revenue growth of approximately 28% and projects earnings between 43 cents and 46 cents a share for second-quarter 2011.

Management expects second-quarter 2011 net course registrations to jump about 25%, and net course registrations from new students to rise approximately 27%.

Second-Quarter 2011 Zacks Consensus

Analysts considered by Zacks, expect American Public to post second-quarter 2011 earnings of 45 cents a share. The current Zacks Consensus Estimate reflects a growth of 21.6% from the prior-year quarter earnings. The current Zacks Consensus Estimate for the quarter ranges between 43 cents and 46 cents a share.

Zacks Agreement & Magnitude

Of the 13 analysts following the stock, none of the analysts have revised their estimates in the last 30 or 7 days, thereby keeping the Zacks Consensus Estimate constant.

Mixed Earnings Surprise History

With respect to earnings surprises, American Public has topped as well as missed the Zacks Consensus Estimate over the last four quarters in the range of negative 4.4% to positive 12.1%. The average remained at positive 5.4%. This suggests that American Public has beaten the Zacks Consensus Estimate by an average of 5.4% in the trailing four quarters.

American Public in Neutral Lane

American Public Education’s focus on serving the military and public service personnel, high student referral rates and accreditation enable it to consistently deliver impressive top and bottom lines, as reaffirmed by its first-quarter 2011 results. The company’s sustained effort to expand educational programs helps it to boost enrollments.

Surprisingly, the company has predicted a 27% growth in new student enrollment for second-quarter 2011, despite the regulation proposed by the Department of Education. The company now is primarily focusing on increasing net registrations from civilian students, to safeguard itself from the adverse impact of a fall in military registrations due to increased military operations. Further, American Public’s debt-free balance sheet and healthy cash reserves augur well for future operating performance.

Currently, we have a long-term ‘Neutral’ rating on the stock. However, American Public, which competes with Apollo Group Inc. (NASDAQ:APOL), holds a Zacks #2 Rank that translates into a short-term ‘Buy’ rating.